Benefits of Salary vs. Hourly Wage

When choosing a job, should you look for salary or hourly positions? Learn about the benefits of salary vs. hourly to determine the right type of position for you.

slide 1 of 3

Salary Benefits

Salaried positions are typically reserved for supervisors, executives and other related positions. However, other employees are eligible for salaried wages as well. Employers must determine if your position meets certain federal qualifications. In some companies, you may actually be able to choose whether you are an hourly or salaried employee.

The main benefits of a salary vs. hourly wage include a guaranteed annual salary, despite hours worked, and lower health care costs. Salaried individuals agree upon an annual salary. Even if you do not work forty hours every week, you will be paid the same weekly salary. When comparing salary vs. hourly, this is a major benefit, especially if you have to leave work for medical appointments.

Other benefits of a salary vs. hourly wage usually include more vacation time, a 401k plan and a higher hourly rate based upon a forty hour work week. Please note that these benefits depend solely upon your employer. However, every employer offers some type of incentive package for becoming a salary employee.

On the downside, the benefits of salary vs. hourly may not seem worth it if you are asked to work more than forty hours per week. Employers expect salaried employees to work longer hours whenever necessary. Though you may work fifty to sixty hours each week, you’ll only be paid for forty. When extra work is needed, many employers ask salaried employees to perform the work over hourly employees.

Before choosing a salaried position, discuss the average hours you’ll be working each week with your employer. Keep in mind that your employer determines your salary based upon your actual salary plus the cost of your salary benefits.

Some employers actually offer a higher pay rate if you take an hourly position. This saves the employer money by not having to offer a salary benefits package. But this is where the hourly benefits end.

The benefits of salary vs. hourly are showcased when looking at the lack of benefits in an hourly position. Sometimes, insurance isn’t offered at all and when it is, the costs are higher. Many hourly positions also keep employees in a part time position so they do not have to offer benefits at all. The upside to this is that by taking an hourly position now, you may eventually be promoted to a salaried position.

slide 3 of 3

Federal Laws

Federal law regulates salary and hourly wages. By law, companies must provide certain benefits for employees. For instance, companies are required by law to pay all employees the set minimum wage. The only exceptions to this rule include employees who make students working school credit, $30 or more per month in tips and employees under the age of 20. As mentioned above in the hourly benefits section, federal law requires hourly employees to be paid time and a half for all work over forty hours per week, but salary employees meeting certain federal criteria, such as managing other employees or firing employees, are exempt from this rule.

Some companies choose to offer fringe benefits in addition to federally regulated benefits. To better see the benefits of salary vs. hourly, take a look at the fringe benefits typically offered to salaried employees.